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Indian companies which work on outsourcing model have a peculiar specialty; their employees work out of either offshore or onsite. Let me explain you this.

Indian outsourcing companies work for nonIndian companies (mostly US, japan or UK). I mean product oriented companies can give their part of work to service oriented companies (e.g. Wipro Infosys TCS Satyam etc.). Since employee of these company work for other company their employees are divided in two categories, one is onsite who are working based out of client location, other is offshore who based out of the native location.

Hmm let me make it simple, e.g. Microsoft has some work do be done (mostly some maintenance kinda work), it can outsource its work to companies like Wipro.
Now since Wipro has to co-ordinate with Microsoft to get the work done, Wipro will put some of its employees in US (Onsite) and rest of the employee will work based out of India (offshore).

In India, these companies hire huge amount of software engineers. Approximately every year they consume more that 80% of total produced engineers. Now in cities like Bangalore & Hyderabad, it’s like every second person is software engineer who work for some Indian outsourcing company

Now lets come to the point, the people who works onsite in-cash huge money, while the people who work offshore are starved. Actually the basic funda is that these companies make money only by hiring cheap labor (offshore people). So there is tough competition in offshore people to go onsite. The Onsite and offshore model itself can be criticized.
The worst thing which is about these companies is the way they send people onsite. It’s absolutely no way talent based, it’s purely based on the QUEUE model. Every one who joins the company will come in the queue of onsite waiting members, irrespective of how talented you are. This is one of the reason most of the time talented guys (not gals ;-) ) leaves the companies before availing onsite. So at any given time you will find that the person who is working onsite is absolutely dumb compared to the person who is working offshore. Consequently, Person who is dumb is getting more money than smart one.

Anyway things are getting done so these companies are still alive. But they are alive just like a bull in floor mill. Product companies always interfaced with the dumb people and hence they have an opinion of Indian companies as a company of dump people. So they only outsource the gibberish stuff to these companies.